After facing steep cuts past Thursday, bargain buyers returned to the grain markets on Friday, sparking a round of technical buying that lifted prices significantly by the close.
Consequentially, corn and soybean futures each rose about 5% higher, with winter wheat contracts up nearly 1.5% and spring wheat contracts gaining more than 1%.
Yield friendly weather forecasts for the rest of June may signal additional volatile price shifts over the next two weeks, however.
On macro markets, oil prices have risen for the fourth consecutive week and both West Texas Intermediate (WTI) and Brent have comfortably settled above the $70 per barrel mark.
WTI closed the week at $71.64 per barrel.
The Brent crude price closed the week at $73.51 per barrel, its highest level since the end of October 2018.
This means that prices have risen by around 40 percent since the beginning of 2021, and more than 70 percent from last year, even though air traffic and travel are not yet back to pre-pandemic levels.
That is why most of the world’s banks expect prices to reach the $80 per barrel mark very soon, a jump of nearly 50 percent since the start of the year.
Breaching the $70 per barrel mark means that hedge funds boosted their positions to pre-pandemic levels, encouraged by signs of a rapidly recovering global economy and continued output restraint among US shale producers.
For most of the first half of the year, $60-$70 was the price range for Brent crude. However, since early June, it has moved to the higher range of $70-$74 and is widely expected to remain in that range for the rest of the year.
The tightness in the forward curve for oil futures continues giving more signs of supply tightness.
The steady rise in prices, with flat upward fluctuations, comes regardless of the possibility of Iranian oil flowing into the market in the near term.
The physical oil market upswing also continues as demand is recovering faster than the supply.
Despite these bullish developments, the US Energy Information Administration (EIA) continues to look bearish, while hedge funds, investors, and speculators are betting on higher prices because they believe global recovery is strong.
However, though speculators are confident in buying oil futures, they are also considering the downside risks that are relatively limited to OPEC+ keeping supplies tight at a time of rising demand.
The EIA reported that US crude inventories fell sharply by 7.4 million barrels to 466.7 million barrels.
This is the fourth consecutive weekly decline in US crude inventories amid higher refinery utilization rates, which rose to 92.6 percent, breaching the 90 percent mark for the first-time post-pandemic since early June.
Meantwhile, Wall Street was down and the dollar surged on Friday as investors tried to balance a seemingly more hawkish stance by the Federal Reserve with persistent optimism about the U.S. economy as it emerges from the pandemic.
The blue-chip Dow and benchmark S&P 500 appeared set for their worst day in a month after Wednesday’s policy update from the Fed, in which officials projected interest rate hikes sooner than expected as the economy recovered.
Stocks had wavered since that update, but took a steeper turn on Friday after Federal Reserve official James Bullard said inflation was stronger than anticipated.
The Dow was down 426.27 points, or 1.26%, the S&P 500 lost 37.79 points, or 0.90%, and the Nasdaq Composite dropped 83.11 points, or 0.59%.
The MSCI world equity index, which tracks shares in 45 nations, fell 6.94 points or 0.97%.
Bullard’s remarks came two days after Fed officials projected interest rate hikes as soon as 2023.
At last week’s meeting, Fed officials vowed to keep up strong monetary support while the economy recovered, while maintaining that they do not see a recent rise in inflation as a long-term economic risk.
Meantime, the U.S. dollar index, which tracks the greenback against six major currencies, jumped to 92.23, the highest since mid-April.
The index was on pace for a weekly gain of about 2%, its best weekly jump in about 14 months.
Coming back on grains market, outlooks for cooler and wetter weather weighed on the grain markets past week, adding to broad-based selling in commodities.
However, some analyst felt Thursday’s sell-off has been overdone, meantime, the dollar firmed and Fed officials projected interest rate hikes as soon as 2023, as we said.
Consequentially, corn prices moved significantly higher on a round of bargain buying Friday, recouping most of Thursday’s steep losses.
Soybean prices also rebounded significantly Friday but were unable to recapture all of Thursday’s losses, despite rising 5% higher on a round of technical buying.
Particulary, soybeans and by-product soyoil have been very volatile, swayed by uncertainty over U.S. biofuel policy and edible oil supply and demand in Asia.
Also rival Malaysian palm oil futures turned higher on Friday after hitting their lowest since February.
Wheat prices has followed other grains higher on a round of bargain buying that lifted some contracts more than 3.5% by the Friday close.
Especially, wheat futures bounced after sliding to a two-month low on Thursday when seasonal pressure from the start of the U.S. winter wheat harvest added to spillover from the broad rout in commodities.
In add, drought stress in the northern U.S. Plains spring wheat belt lent support.
Thuse, Chicago Board of Trade July corn settled up 22-1/4 cents at $6.55-1/4 per bushel.
July soybeans ended up 66-1/4 cents at $13.96 a bushel and July wheat rose 23-3/4 cents to settle at $6.62-3/4 a bushel.
Corn basis bids, on the other hand, were mixed at two interior river terminals and slumped 5 cents lower at an Ohio elevator while holding steady elsewhere across the central U.S..
Soybean basis bids were steady to mixed Friday, moving as much as 10 cents higher at an Indiana processor and as much as 20 cents lower at an Ohio river terminal.
So, weather remains in the spotlight, given continuing risks of drought stress to Midwest crops at a time when markets are looking to large U.S. corn and soybean harvests to ease international supply tensions.
On European markets, a new resolution from the European Union will suspend tariffs that had been levied on a variety of U.S. goods, including agricultural products.
This deal resolves a long running dispute.
However, according to House Agriculture Committee Chairman David Scott, from this deal benefits American farmers, ranchers and other food and agriculture US industry stakeholders who were harmed by the retaliatory tariffs from this dispute.
Strategie Grains last week raised sharply its forecast for EU soft wheat exports, citing attractive prices in Romania and Bulgaria as well as Germany, Poland and the Baltic states.
Meantime, Strategie Grains reported that signs are pretty favourable, indeed, EU supply is going to be very healthy, also because showers and hot weather in the past month have put the bloc on course for a bigger wheat crop this year.
At the same time, competitive prices are helping early EU export sales for the new season that begins in July.
Heavy rain in Romania could hurt harvest quality, but the country would still find ready markets given tight global supply of feed grains.
On this wake, farm office FranceAgriMer estimates the country’s corn conditions held steady this past week, despite plenty of hot weather, with 91% rated in good-to-excellent condition through June 14.
In France 81% of the country’s soft wheat crop is in good-to-excellent condition through June 14 – unchanged from a week ago, according to farm office FranceAgriMer.
Barley conditions are also stable, with 86% of the crop rated good-to-excellent.
From Black Sea basin, Ukraine has started the 2021 grain harvest, sending the first cars with grain to Black Sea ports for future export.
The port, located in Mykolayiv, said it had received the first cars loaded with barley from the 2021 harvest from Louis Dreyfus.
The government and the agriculture ministry have not reported on the start of the new harvest.
Ukraine’s southern regions traditionally starts the harvest in the first half of June.
The agriculture ministry said on Friday the country had completed the 2021 grain sowing.
Favourable weather could help Ukraine to harvest at least 75 million tonnes of grain this year, versus 65 million tonnes in 2020, the ministry has said.
Meantime, Ukraine’s grain exports have fallen by around 22% so far in the 2020/21 July-June season to 43.4 million tonnes, agriculture ministry data showed on Friday.
The volume included 16.3 million tonnes of wheat, 22.3 million tonnes of corn and almost 4.15 million tonnes of barley, the data showed.
The 𝗥𝘂𝘀𝘀𝗶𝗮𝗻 agriculture ministry has increased the 𝗲𝘅𝗽𝗼𝗿𝘁 𝘁𝗮𝘅 𝗳𝗼𝗿 𝘄𝗵𝗲𝗮𝘁 𝗮𝗻𝗱 𝗰𝗼𝗿𝗻 for the week of June 23-29:
Wheat, tax 38.1$ per tonne; indicative prices 254.5 $ per tonne;
Barley, tax 39.6$ per tonne; indicative prices 241.7 $ per tonne;
Corn, tax 50.2$ per tonne; indicative prices 256.8 $ per tonne;
As for June 17-22 , tax were respectvily 33.3, 39.6, 48.2 $ per tonne.
Meantime indicative prices were 247.7, 241.7, 253.9 respectvily.
As for June 9-16, tax were 29.4, 39.6, 50.0 $ per tonne;
indicative prices were 242.0, 241.7, 256.5.
As for June 2-8, tax were 28.1, 39.6, 52.2 $ per tonne;
indicative prices were 240.2, 241.7, 259.7 respectvily.
Russia, the world’s largest wheat exporter, launched its formula-based duty for grain exports from June as part of other measures the government hopes will help to stabilise domestic food inflation.
The size of the duty is determined by the agriculture ministry on a weekly basis, based on price indicators traders are reporting.
From Pakistan, the Economic Coordination Committee (ECC) of the cabinet on Wednesday approved 3 million tons of wheat import for building up its strategic reverses in the country.
The decision was taken during a meeting presided over by Finance Minister Shaukat Tarin, on a request of food ministry and subject to approval by Public Procurement Regulatory Authority Board.
The government estimated wheat production at 26.04 million tons, up 1.7 percent over the last year.
ECC approved the provision of 500,000 tons of wheat to the government of Khyber Pakhtunkhwa out of Pakistan Agricultural Storage and Services Corporation stock during the crop year 2021/22 on the usual terms and conditions.
All charges, including incidental charges will be borne by the provincial food department.
Similarly, 500,000 tons imported wheat has also been allocated to meet the provincial requirement.
From The Middle Kingdom, Chinese corn imports in May surged 395% year-over-year to 3.16 mln tonne.
Year-to-date corn imports are up 323%, with 11.73 mln tonne.
Barley imports in May surged 115% year-over-year to 1.11 mln tonne.
Year-to-date barley imports are up 139%, with 4.65 mln tonne.
Chinese wheat imports in May dipped 3% year-over-year to 790,000 tonne.
However, year-to-date wheat imports have jumped 89% over last year’s pace, with 4.61 mln tonne.
Chinese imports of sorghum (+237%), pork (+13,7%) and sugar (+94%)are also significantly higher than a year ago.
In add, U.S. traders are also reporting that China purchased at least eight cargo loads of U.S. soybeans totaling approximately 480,000 MT.
The grain is for shipment out of U.S. Pacific Northwest ports primarily in October, and the sales came soon after prices dropped to the lowest levels since March earlier this week, according to those familiar with the deals.
Meantime, however, China’s Sinograin auctioned off 1.5 million bushels of corn it had previously purchased from Ukraine.
This is the second sale the state stockpiler has initiated so far this month in an attempt to quell rising domestic grain prices.
In add, China plans to subsidize its farmers to the tune of $3.1 billion this year to offset rising fuel and fertilizer cost, according to the country’s cabinet, which stated: “Subsidies should be paid out as soon as possible, so as not to miss the farming season.”
From Australia, rains across WA pushing over an inch for many so far into the weekend – and forecast to continue through today for the inland wheat belt
Latest weather map runs are sending most of the system south of the coast in SA, though chances of 15-20mm across the EP – and a likely 20+ mm for central NSW off the storm moving through there today.
The weaker AUD continuing to support ag markets, trading under 75¢ – and now with a stronger board behind today’s open.
On the international trade scenario, Iran has purchased 7.2 million bushels of milling wheat in a tender that closed on Wednesday.
The grain will likely be sourced from Germany, Russia or the Baltic States, and is for shipment in July and August.
The Philippines purchased 5.5 million bushels of wheat in a tender that closed earlier this week.
The grain is likely sourced from Australia and is for shipment in July and August.
South Korea’s Major Feedmill Group (MFG) purchased an estimated 136,000 tonnes of animal feed corn in a deal on Friday, European traders said.
The corn was optional origin but expected to be sourced from South America.
It was purchased in two 68,000 tonne consignments both in a combination of outright price and premiums over Chicago corn futures.
The outright price was estimated at $295.21 a tonne c&f plus a surcharge of $1.50 a tonne for additional port unloading for both consignments.
The premium element for both consignments was estimated at 198.50 U.S. cents c&f over the Chicago September corn contract CU1 plus a surcharge of $1.50 a tonne for additional port unloading.
The seller of all the grain was believed to be trading house Cofco.
The first consignment was sought for arrival in South Korea around Oct. 5. If sourced from South America, shipment is between July 26 and Aug. 26.
The second consignment was sought for arrival in South Korea around Oct. 10. If sourced from South America, shipment is between Aug. 1 and Aug. 31.
The seller has the right to supply only 52,000 tonnes for both consignments if the corn is sourced from South Africa.
Meantime, also South Korea’s Feed Leaders Committee (FLC) purchased about 65,000 tonnes of corn to be sourced from any worldwide origins in an international tender which closed on Friday, European traders said.
It was purchased at an estimated $295.21 a tonne c&f plus a $1.50 a tonne surcharge for additional port unloading for arrival in South Korea in October.
Also in this case, seller was believed to be trading house Cofco.
So, South Korean importers bought a total 261,000 tonnes of corn on Friday in bargain-buying after sharp fall in Chicago corn futures on Thursday.
Korean feed grain importers have recently been concentrating on cheaper feed wheat.
Egypt’s state grains buyer, the General Authority for Supply Commodities (GASC,) said on Saturday it was seeking soyoil and sunflower oil in an international purchasing tender for arrival Sept. 5-30.
GASC said traders should submit bids for payment with 180-day letters of credit and at sight and that it would choose between both offers.
The deadline for offers is June 22.
GASC said it wanted offers for at least 30,000 tonnes of soyoil and 10,000 tonnes of sunflower oil.
Turkey’s state grain board TMO has issued an international tender to purchase a total of about 395,000 tonnes of red milling wheat, traders said on Thursday.
The deadline for submission of price offers in the tender is June 30.
Shipment is believed to be between July 19 and Aug. 21.
The wheat is sought in a series of consignments of between 20,000 and 50,000 tonnes. The wheat is for unloading in the Turkish ports of Derince, Iskenderun, Mersin, Izmir, Bandirma, Tekirdag, Samsun, Trabzon and Karasu.
Turkey also issued a separate tender on Thursday to buy 320,000 tonnes of animal feed barley.
Dead line is for June 24 at 10:00 a.m. (local time).
Offers can be given in TL/USD on a FOB & CFR &/or ex-warehouse &/or Free Zone basis.
Shipment is for 2-18 July.
Tonigth we will see how the sessions close.
